Assalam-o-Alaikum I want to construct the Macroeconomics Policy Index of there Major Macroeconomic Policies, Trade Police, Budget Deficit and Monetary Policy measured by the Trade Openness to GDP ratio, budget deficit to GDP ratio, inflation. For this I am using the Principle Component Analysis. I h...

Assalam-o-Alaikum I want to construct the Macroeconomics Policy Index of there Major Macroeconomic Policies, Trade Police, Budget Deficit and Monetary Policy measured by the Trade Openness to GDP ratio, budget deficit to GDP ratio, inflation. For this I am using the Principle Component Analysis. I h...

one more i want to ask is that is this correct that the IVLS can only be applied to exactly identified equations where as the 2SLS can be applied to over-identified equation and exactly identified equations.